Maximum Percentage a Partner Is Allowed to Own

Gretchen Smith on

Our club has four members. One member's investment is
approximately 40% of the value of the club. The three others
members have about a 20% investment each. These percentages
are allowable in our partnership agreement (We used the
agreement from the bivio site. ) From a federal regulation
standpoint, is there a maximum limit on the percent of a
club's value that one partner can own? Thanks! Gretchen

Scott Freeman on

This is an interesting question. I have never seen any
Federal regulation related this and feel the pertinent
Federal regulations would be promulgated by the Securities
and Exchange Commission. The SEC website does address
investment clubs on page :
https://www.sec.gov/reportspubs/investor-publications/investorpubsinvclubhtm.html

Mike & Kim Potter on

I don't know anything about federal regulations. Our club has a max of 20% for any individual. This rule loses some of it's significance when a club decides to vote one person one vote - rather than individuals voting the number of units of the total that they own.

Kim Potter

Treasurer - BI Brighton Model Investment Club - Michigan

On Friday, October 4, 2019, 02:09:27 PM EDT, Gretchen Smith via bivio.com <user*27523600001@bivio.com> wrote:

Our club has four members. One member's investment is
approximately 40% of the value of the club. The three others
members have about a 20% investment each. These percentages
are allowable in our partnership agreement (We used the
agreement from the bivio site. ) From a federal regulation
standpoint, is there a maximum limit on the percent of a
club's value that one partner can own? Thanks! Gretchen

ira smilovitz on

There are no regulations regarding maximum ownership. The various guidelines (20%, 2x number of members, etc.) are intended to reduce the likelihood that one or several members will exert or feel they deserve to exert undue influence on the decisions of the club.

Ira Smilovitz, EA

On Fri, Oct 4, 2019 at 4:04 PM Mike & Kim Potter via bivio.com <user*22890200001@bivio.com> wrote:

I don't know anything about federal regulations. Our club has a max of 20% for any individual. This rule loses some of it's significance when a club decides to vote one person one vote - rather than individuals voting the number of units of the total that they own.

Kim Potter
Treasurer - BI Brighton Model Investment Club - Michigan

On Friday, October 4, 2019, 02:09:27 PM EDT, Gretchen Smith via bivio.com <user*27523600001@bivio.com> wrote:

Our club has four members. One member's investment is
approximately 40% of the value of the club. The three others
members have about a 20% investment each. These percentages
are allowable in our partnership agreement (We used the
agreement from the bivio site. ) From a federal regulation
standpoint, is there a maximum limit on the percent of a
club's value that one partner can own? Thanks! Gretchen

Laurie Frederiksen on

There are no federal rules governing this.

Our sample agreement recommends this:

No partner may own more than 2.0 times the percentage of the club that he/she represents to the number of members. For instance, in a club of 10 members, no member may own more than 20% (2 x 1/10 =.20 or 20%) of the capital accounts of all the partners.

It is more an operating issue. If one members ownership gets too much out of line, it could really disrupt the club if, for example, they wanted to withdraw.

You also might want to have limits if your club allows voting by ownership percentage and you don't want one member to have too large of a say in decisions.

Most clubs, however, give each member an equal vote no matter what their ownership percentage is.

Laurie Frederiksen
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On Fri, Oct 4, 2019 at 3:58 PM Scott Freeman via bivio.com <user*1595500001@bivio.com> wrote:

This is an interesting question. I have never seen any
Federal regulation related this and feel the pertinent
Federal regulations would be promulgated by the Securities
and Exchange Commission. The SEC website does address
investment clubs on page :
https://www.sec.gov/reportspubs/investor-publications/investorpubsinvclubhtm.html

gsmithreal on

Thank you all so much for your guidance! I just wanted to make sure we didn't become lawbreakers :) Each of our partners does have an equal vote, no matter the ownership percentage. We feel that is very important. Thanks again!

Gretchen

-----Original Message-----
From: Laurie Frederiksen <laurie@bivio.biz>
To: The Club Cafe <club_cafe@bivio.com>
Sent: Fri, Oct 4, 2019 4:10 pm
Subject: Re: [club_cafe] Re: Maximum Percentage a Partner Is Allowed to Own

There are no federal rules governing this.

Our sample agreement recommends this:

No partner may own more than 2.0 times the percentage of the club that he/she represents to the number of members. For instance, in a club of 10 members, no member may own more than 20% (2 x 1/10 =.20 or 20%) of the capital accounts of all the partners.

It is more an operating issue. If one members ownership gets too much out of line, it could really disrupt the club if, for example, they wanted to withdraw.

You also might want to have limits if your club allows voting by ownership percentage and you don't want one member to have too large of a say in decisions.

Most clubs, however, give each member an equal vote no matter what their ownership percentage is.

Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe

On Fri, Oct 4, 2019 at 3:58 PM Scott Freeman via bivio.com <user*1595500001@bivio.com> wrote:

This is an interesting question. I have never seen any
Federal regulation related this and feel the pertinent
Federal regulations would be promulgated by the Securities
and Exchange Commission. The SEC website does address
investment clubs on page :
https://www.sec.gov/reportspubs/investor-publications/investorpubsinvclubhtm.html